Technical Market Report for April 5, 2014

The good news is:
• The blue chip indices hit all time highs in the past week.

The negatives

In the past week the S&P 500 (SPX) closed at an all time high and the
Dow Jones Industrial Average (DJIA) missed its all time high by just 3 points.
The Russell 2000 (R2K), representing the secondaries missed its all time high
by 1.3%. The index highs were not confirmed by the number of new highs on any
exchange.

The chart below covers the past 6 months showing the NASDAQ composite (OTC)
in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green.
Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH is near its low for the past 6 months.

The next chart is similar to the one above except is shows SPX in red and
NY NH, in green, has been calculated from NYSE data.

NY NH was a little stronger than OTC NH last week, but was closer to its low
for the past 6 months than its high.

The next chart covers the past month showing all of the major indices and
the S&P mid cap index.

The secondaries lead both up and down and for the past month they have been
heading down.

The positives

The number of new lows remains minimal.

The chart below covers the past 6 months showing the OTC in blue and a 40%
trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC
HL Ratio) in red. Dashed horizontal lines have been drawn at 10% levels for
the indicator, the line is solid at the neutral 50% level.

OTC HL Ratio recovered to 71% last week.

The next chart is similar to the one above except it shows the SPX in red
and NY HL Ratio, in blue, has been calculated from NYSE data.

What, me worry?

NY HL Ratio rose to an extremely strong 94% on Friday.

Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of April during
the 2nd year of the Presidential Cycle.

The tables below show the daily return for the 5 trading days prior to the
2nd Friday of April during the 2nd year of the Presidential Cycle.

OTC data covers the period from 1963 - 2013 while SPX data runs from 1953
- 2013. There are summaries for both the 2nd year of the Presidential Cycle
and all years combined. Prior to 1953 the market traded 6 days a week so that
data has been ignored.

Good Friday is a market holiday that usually falls in April. The program generating
the tables below counts Fridays when the market is open so that will cause
an increasing number of errors as April progresses. The April charts shown
in the March 29 report do not suffer from that same shortcoming. So, for a
more accurate rendition of April’s history, refer to those charts.

Returns for the coming week have been positive by most measures.

Report for the week before the 2nd Friday of April.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 2

Year

Mon

Tue

Wed

Thur

Fri

Totals

1966-2

0.30%

0.20%

-0.33%

0.10%

0.32%

0.59%

1970-2

-0.27%

-0.23%

-1.39%

-0.40%

-0.31%

-2.60%

1974-2

-0.41%

1.02%

0.43%

0.20%

-0.65%

0.59%

1978-2

0.28%

-0.08%

0.40%

1.03%

1.18%

2.80%

1982-2

-0.14%

-0.07%

-0.19%

0.39%

0.62%

0.61%

1986-2

-0.68%

1.14%

0.07%

0.80%

0.46%

1.79%

1990-2

0.09%

-0.29%

-0.90%

-0.58%

-0.75%

-2.43%

Avg

-0.17%

0.34%

-0.04%

0.37%

0.17%

0.67%

1994-2

-0.08%

-1.19%

-1.60%

-0.01%

0.09%

-2.79%

1998-2

0.26%

0.99%

1.10%

-0.27%

0.45%

2.53%

2002-2

0.89%

-2.42%

1.41%

-2.37%

1.79%

-0.70%

2006-2

-0.64%

1.95%

0.63%

-0.35%

-0.83%

0.74%

2010-2

0.16%

0.33%

1.58%

0.43%

-1.37%

1.13%

Avg

0.12%

-0.07%

0.62%

-0.51%

0.03%

0.18%

OTC summary for Presidential Year 2 1966 - 2010

Avg

-0.02%

0.11%

0.10%

-0.09%

0.08%

0.19%

Win%

50%

50%

58%

50%

58%

67%

OTC summary for all years 1963 - 2013

Avg

0.01%

-0.03%

-0.05%

0.20%

-0.26%

-0.14%

Win%

61%

55%

55%

57%

53%

61%

SPX Presidential Year 2

Year

Mon

Tue

Wed

Thur

Fri

Totals

1954-2

0.18%

-0.92%

0.37%

1.00%

0.73%

1.36%

1958-2

0.62%

1.02%

-0.78%

0.36%

1.09%

2.31%

1962-2

-0.77%

0.37%

-0.22%

-1.02%

0.28%

-1.37%

1966-2

0.03%

-0.37%

0.10%

0.36%

0.13%

0.25%

1970-2

-0.70%

-0.27%

-0.03%

0.05%

-0.33%

-1.29%

Avg

-0.13%

-0.03%

-0.11%

0.15%

0.38%

0.25%

1974-2

-0.08%

1.75%

0.75%

0.45%

-1.09%

1.78%

1978-2

0.35%

-0.27%

-0.16%

0.97%

2.13%

3.03%

1982-2

-0.19%

-0.01%

-0.14%

0.45%

0.40%

0.51%

1986-2

-0.03%

2.14%

0.10%

1.15%

-0.20%

3.16%

1990-2

0.12%

-0.02%

-1.15%

-0.77%

-0.88%

-2.70%

Avg

0.04%

0.72%

-0.12%

0.45%

0.07%

1.16%

1994-2

0.62%

-0.51%

-0.29%

0.03%

-0.04%

-0.20%

1998-2

-0.09%

0.54%

0.32%

-0.99%

1.31%

1.09%

2002-2

0.23%

-0.67%

1.13%

-2.37%

0.66%

-1.01%

2006-2

-0.29%

1.74%

0.17%

0.12%

-0.01%

1.72%

2010-2

0.18%

0.07%

1.12%

0.08%

-1.61%

-0.17%

Avg

0.13%

0.23%

0.49%

-0.63%

0.06%

0.29%

SPX summary for Presidential Year 2 1954 - 2010

Avg

0.01%

0.31%

0.09%

-0.01%

0.17%

0.57%

Win%

53%

47%

53%

73%

53%

60%

SPX summary for all years 1953 - 2013

Avg

0.16%

0.09%

0.05%

0.01%

-0.08%

0.24%

Win%

62%

56%

56%

54%

52%

57%

Money Supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth has
been on trend for the past few weeks.

Conclusion

The market has been following the seasonal pattern quite closely and that
pattern calls for a top around the 3rd week of April. New highs have been deteriorating
for months while other breadth indicators began deteriorating about a month
ago. There is every reason to expect the seasonal pattern to play out as it
has in the past.

I expect the major averages to be higher on Friday April 11 than they were
on Friday April 4.

Last week the OTC was down while all the other major indices were up so I
am calling last weeks positive forecast a tie.

Mike Burk independently publishes a weekly newsletter on the stock market from a technical perspective.

Charts and figures presented
herein are believed to be reliable but we cannot attest to their accuracy.
Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack
(fasttrack.net), Quotes Plus (qp2.com) and the Wall Street Journal (wsj.com).
Historical data is from Barron's and ISI price books. The views expressed are
provided for information purposes only and should not be construed in any way
as investment advice. Furthermore, the opinions expressed may change without
notice.